Correlation Between East Africa and Commander Resources

Can any of the company-specific risk be diversified away by investing in both East Africa and Commander Resources at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining East Africa and Commander Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between East Africa Metals and Commander Resources, you can compare the effects of market volatilities on East Africa and Commander Resources and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in East Africa with a short position of Commander Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of East Africa and Commander Resources.

Diversification Opportunities for East Africa and Commander Resources

0.04

Correlation Coefficient

East Africa  Commander Resources

Significant diversification

The 3 months correlation between East and Commander is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding East Africa Metals and Commander Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commander Resources and East Africa is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on East Africa Metals are associated (or correlated) with Commander Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commander Resources has no effect on the direction of East Africa i.e., East Africa and Commander Resources go up and down completely randomly.

Pair Corralation between East Africa and Commander Resources

Assuming the 90 days horizon East Africa Metals is expected to generate 8.2 times more return on investment than Commander Resources. However, East Africa is 8.2 times more volatile than Commander Resources. It trades about 0.09 of its potential returns per unit of risk. Commander Resources is currently generating about 0.03 per unit of risk. If you would invest  7.91  in East Africa Metals on September 3, 2024 and sell it today you would earn a total of  3.09  from holding East Africa Metals or generate 39.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

East Africa Metals  vs.  Commander Resources

East Africa Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days East Africa Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Commander Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Commander Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Commander Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with East Africa and Commander Resources

The main advantage of trading using opposite East Africa and Commander Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East Africa position performs unexpectedly, Commander Resources can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Commander Resources will offset losses from the drop in Commander Resources' long position.

The idea behind East Africa Metals and Commander Resources pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.